Correlation Between CVS HEALTH and Canso Credit

Can any of the company-specific risk be diversified away by investing in both CVS HEALTH and Canso Credit at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CVS HEALTH and Canso Credit into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CVS HEALTH CDR and Canso Credit Trust, you can compare the effects of market volatilities on CVS HEALTH and Canso Credit and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CVS HEALTH with a short position of Canso Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS HEALTH and Canso Credit.

Diversification Opportunities for CVS HEALTH and Canso Credit

-0.77

Correlation Coefficient

CVS HEALTH  Canso Credit

Pay attention - limited upside

The 3 months correlation between CVS and Canso is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and Canso Credit Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canso Credit Trust and CVS HEALTH is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CVS HEALTH CDR are associated (or correlated) with Canso Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canso Credit Trust has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and Canso Credit go up and down completely randomly.

Pair Corralation between CVS HEALTH and Canso Credit

Assuming the 90 days trading horizon CVS HEALTH CDR is expected to under-perform the Canso Credit. In addition to that, CVS HEALTH is 4.11 times more volatile than Canso Credit Trust. It trades about -0.05 of its total potential returns per unit of risk. Canso Credit Trust is currently generating about 0.08 per unit of volatility. If you would invest  1,322  in Canso Credit Trust on October 10, 2024 and sell it today you would earn a total of  263.00  from holding Canso Credit Trust or generate 19.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

CVS HEALTH CDR  vs.  Canso Credit Trust

CVS HEALTH CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS HEALTH CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Canso Credit Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canso Credit Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Canso Credit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CVS HEALTH and Canso Credit

The main advantage of trading using opposite CVS HEALTH and Canso Credit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS HEALTH position performs unexpectedly, Canso Credit can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Canso Credit will offset losses from the drop in Canso Credit's long position.

The idea behind CVS HEALTH CDR and Canso Credit Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.